States That Exempt Pensions From Income Tax

Fifteen states do not tax pension income at all. Those states are: Alaska, Florida, Illinois, Iowa, Mississippi, Missouri, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wyoming, and Wisconsin. The exemption typically applies to all pensions — military, government employee, private sector — though a few states have narrow rules about when the exemption kicks in.

The definition of "pension" matters. Most of these states mean regular payments from a pension plan, not lump-sum withdrawals or rollovers. If you take a lump sum from your pension and roll it into an IRA, that IRA income may be taxed differently than the original pension was. New Hampshire and Tennessee, for instance, tax interest and dividends but not pensions, so the source of the money changes the tax treatment.

If you live in one of these states and receive a pension, you will not owe state income tax on that pension payment. You may still owe federal income tax — that is separate and applies everywhere. You may also owe property tax or sales tax depending on the state.

Key Takeaways

  • Fifteen states — Alaska, Florida, Illinois, Iowa, Mississippi, Missouri, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wyoming, and Wisconsin — do not tax pension income.
  • The exemption usually covers all types of pensions (military, government, private) but may not cover lump-sum distributions or money rolled into an IRA.
  • Living in a no-tax-on-pensions state does not exempt you from federal income tax on that same pension.
  • Some states that do not tax pensions still tax other retirement income like Social Security, interest, or dividends.

How Pension Tax Exemptions Work in Practice

When you receive a pension check, your pension administrator does not automatically withhold state income tax if you live in one of these fifteen states. You will still see federal withholding on the check unless you filed a form to stop it. The state simply does not claim a share of that income.

If you move to one of these states after you start receiving a pension, the exemption applies to your new state residence going forward. If you were taxed by your old state on pension income earned while you lived there, you do not get that money back. The exemption is prospective, not retroactive.

Some people move specifically to reduce their tax burden in retirement. If you are considering a move and pension tax is part of your decision, check whether the state taxes other income you receive — Social Security, investment income, rental income — because the total picture matters more than pension tax alone.

States That Tax Pensions But With Limits

Several states tax pensions but allow you to exclude some or all of it depending on your age or income. Colorado, Kansas, Louisiana, and Oklahoma allow residents over a certain age (usually 55 or 62) to exclude some pension income. The amount excluded varies by state and changes year to year.

Georgia and Mississippi have different rules: Georgia taxes pensions but exempts military pensions and some government pensions. Mississippi exempts all pensions but taxes other retirement income. These partial exemptions mean you need to know which type of pension you receive and which state you live in to know your actual tax bill.

If you receive a pension and live in a state that taxes it, your pension administrator will withhold state tax from your check unless you file a form to stop it. The amount withheld depends on the form you file and the state's tax rate.

Military and Government Pensions

Military pensions are treated the same as civilian pensions in most states. If the state does not tax pensions, it does not tax military pensions. If the state taxes pensions, it taxes military pensions the same way.

Government employee pensions — from state or local government jobs — are also treated like any other pension in most states. A few states have special rules: Illinois exempts all public pensions but taxes private pensions. Pennsylvania exempts all pensions equally. Check your specific state if you receive a government pension and want to know the exact treatment.

Federal Tax Still Applies Everywhere

No state exemption changes your federal tax obligation. The Internal Revenue Service taxes all pension income the same way regardless of where you live. You will owe federal income tax on your pension unless you have no other income and fall below the federal filing threshold.

Your pension administrator will withhold federal tax from your pension check based on the W-4P form you file with them. If you do not want federal withholding, you can file a form to stop it, but you will then owe the tax when you file your federal return. Most people keep federal withholding in place to avoid a large bill at tax time.

How to Find Out Your State's Pension Tax Rules

Your state's department of revenue publishes the rules for pension taxation. You can find the website by searching "[your state] department of revenue" and looking for a page on retirement income or pension taxation. Most states have a worksheet or a summary that tells you whether your specific pension is taxed.

Your pension administrator can also tell you whether state tax is withheld from your pension. Call the benefits department or check your pension statement — it will show state withholding if your state taxes pensions. If you see no state withholding, your state likely does not tax pensions, but confirm with the state revenue office to be sure.

If you are moving to a new state or considering a move, contact the new state's revenue office before you move. They can tell you the exact rules that will apply to your pension starting on your move date.

Frequently Asked Questions

If I move to a no-tax-on-pensions state, do I get a refund for taxes I paid before?

No. State pension tax exemptions apply going forward from your move date, not retroactively. If you paid state tax on a pension while living in another state, that money does not come back. The exemption begins when you establish residency in the new state.

Does a state that doesn't tax pensions also not tax Social Security?

Not necessarily. Some states that exempt pensions tax Social Security, and some do both or neither. Tennessee and New Hampshire, for example, do not tax pensions but do tax some retirement income. Check your specific state's rules on Social Security separately from its pension rules.

What if I receive both a pension and Social Security?

Each type of income is taxed under different rules depending on your state. A state might not tax your pension but tax your Social Security, or vice versa. You need to know your state's rules for each income type. Your state revenue office can tell you the combined tax picture.

If my pension is from a private company, is it treated differently than a government pension?

In most states, no — private and government pensions are taxed the same way. A few states have different rules for military or government pensions. Check your state's revenue office if you want to confirm the treatment of your specific pension type.

Do I still have to file a state tax return if I only have pension income and live in a no-tax-on-pensions state?

Usually no, but it depends on whether you have other income and your state's filing requirements. Some states require a return if you have any income above a threshold, even if the pension itself is not taxed. Check your state's filing requirements or contact the revenue office to be sure.